Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other recurring loans.


Understanding the qualifying ratio

For the most part, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes auto payments, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses


If you want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualifying Calculator.

Don't forget these are only guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford. Agape Home Mortgage, LLC can walk you through the pitfalls of getting a mortgage. Give us a call at 503-243-5626. Want to get started? Apply Here.

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